Daily Returns


Kerry Back

BUSI 721, Fall 2022
JGSB, Rice University

Daily SPY returns

SPY = S&P 500 ETF

Box and density plots of daily SPY returns

Normal distribution has same mean and std dev as actual

Autocorrelations

  • Autocorrelation is the correlation of a time series with its own lagged values.
  • Autocorrelation at lag 1 tells us whether the current value predicts the next one.
  • For monthly data, autocorrelation might be high at lag 12 (seasonality).

Autocorrelations of daily SPY returns

Does today’s return predict tomorrow’s?

No, the autocorrelation is almost zero.

Autocorrelations of absolute returns

Does today’s absolute return predict tomorrow’s?

Yes, volatility is persistent.

HTML tutorial